US Express Leasing begins securitization program

US Express Leasing, an independent equipment leasing company, recently priced its first term securitization, a $325 million deal. Market watchers say it is another sign of resurgence from a market that experienced a slowdown just five years ago.

Credit Suisse acted as lead manager on the deal, a likely arrangement, considering that the bank owns the private equity company, DLJ Merchant Banking Partners, which itself owns US Express Leasing. Barclays Capital and Wachovia Securities are on board as co-managers.

About 12,346 small-ticket leases on office technology and medical equipment will secure the bonds, which are expected to pay investors 5.37% on notes rated AAA' by Moody's Investors Service and Standard & Poor's. The other tranche, rated Ba2' and BB-' by Moody's and S&P, respectively, will pay 10.1%.

Market professionals say the deal is another sign that the small-ticket equipment leasing asset class is enjoying a positive turnaround, and that more new issuers are waiting in the wings to launch securitizations. As a group, equipment leases are expected to generate about $7 billion in primary issuance for 2006. Although that number is tiny compared to such asset classes as credit cards and autos, it will surpass issuance for the last few years.

About five years ago, the asset class experienced a downturn, partially a result of industry consolidation, which suppressed issuance activity for several years. Market conditions are much different now. Said one market source: "entrepreneurs are coming back, and these people have substantial management experience. There is a lot of money on the equity side that is getting behind them."

Based Parsippany, N.J., US Express Leasing is almost as new to the world as it is to the term securitization market. It was founded about two and half years ago and provides financing for dealers and vendors of commercial and industrial, medical and healthcare, office equipment and technology.